**EMPLOYMENT AGREEMENT**

 

This Employment Agreement (the“Agreement”) is entered into as of May ___, 2001  (the “Effective Date”) between Click2learn.com, Inc., aWashington corporation with its principal offices located at 110-110th Avenue N.E.,Bellevue, Washington 98004-5840, and/or one or more subsidiaries ofClick2learn.com, Inc. (collectively the “Company”) and SUDHEER KONERU(“Employee”).

In consideration of the promises and theterms and conditions set forth in this Agreement, the parties agree as follows:

1.          **Position**

During the term of this Agreement,Company will employ Employee and Employee will serve as an executive officer ofthe Company with the title of Executive Vice President of Products andStrategy.

2.          **Duties**

Employee will be responsible for allaspects of Click2Learn’s products, including market research, planning,development and product marketing, and will have such additional duties as arereasonably determined by the Company consistent with his position as ExecutiveVice President of Products and Strategy. Employee will comply with and be bound by Company’s operating policies,procedures, and practices from time to time in effect during Employee’semployment.  Employee hereby representsand warrants that he is free to enter into and fully perform this Agreement andthe agreements referred to herein without breach of any agreement or contractto which he is a party or by which he is bound.

3.          **ExclusiveService**

Employee will devote his fullprofessional time and efforts exclusively to this employment and apply all hisskill and experience to the performance of his duties and advancing theCompany’s interests in accordance with Employee’s experience and skills.  In addition, Employee will not engage in anyconsulting activity except with the prior written approval of Company, or atthe direction of Company, and Employee will otherwise do nothing incompatiblewith the performance of his duties hereunder.

4.          **Term of Agreement**

ThisAgreement will commence on the Effective Date and will continue until theearlier of one year after the Effective Date or when terminated pursuant toSection 7 hereof.  The expiration ortermination of this Agreement will not result in the termination of Employee’semployment, but Employee will become an “at will” employee upon suchtermination or expiration.

5.          **Compensationand Benefits**

             (a)         Base Salary.  The Company agrees to pay Employee aninitial base salary of $130,000 through December 31, 2001.  Effective January 1, 2002 Employee’s basesalary will be increased to $190,000 per year.   Employee’s salary will be payable as earned in accordance withCompany’s customary payroll practice, which currently is to pay salary on abi-weekly basis.

             (b)        Additional Benefits.  Employee will be eligible to participate inCompany’s employee benefit plans of general application, including withoutlimitation the Company’s 401(k) Plan and those plans covering life, health,disability and dental insurance in accordance with the rules established forindividual participation in any such plan and applicable law.  Employee will receive 4 weeks of paidvacation per year (consisting of the week from December 25 through January 1plus three additional weeks to be taken in the discretion of Employee), and inaddition will receive such other benefits, including health club membership,holidays and sick leave, as the Company generally provides to its employeesholding similar positions as that of Employee.

             (c)         Bonus Plan.  Employee shall be eligible to participate inthe Click2learn.com, Inc. 2001 Bonus Plan.  Bonuses are determined based on corporate revenue and operatingincome.  As EVP of Products, Employee’starget bonus is 30% of annual base salary, with a maximum bonus of 100% of basesalary.

             (d)        Business Expenses.     The Company will reimburse Employee for allreasonable and necessary expenses incurred by Employee in connection with theCompany’s business, provided that such expenses are deductible to the Company,are in accordance with the Company’s applicable policy and are property documentedand accounted for in accordance with the requirements of the Internal RevenueService.

6.          **ProprietaryRights**

Employee hereby agrees that concurrentlywith the execution of this Agreement, Employee will execute Click2learn’sstandard form of Employee Invention, Confidentiality, Non-raiding andNoncompetition Agreement (the “Invention Agreement”).

7.          **Termination**

             (a)         Eventsof Termination.    Employee’semployment with the Company shall terminate upon any one of the following:

                           (i)          the Company’s determination made ingood faith that it is terminating the Employee for “cause” as defined underSection 7(b) below (“Termination for Cause”); or

                           (ii)         the effective date of a written noticesent to Employee stating that the Company is terminating his employment,without cause, which notice can be given by the Company at any time after theEffective Date at the Company’s sole discretion, for any reason or for noreason (“Termination Without Cause”); or

                           (iii)        the effective date of a written noticesent to the Company from Employee stating that Employee is electing toterminate his employment with the Company “Voluntary Termination”).

             (b)        “Cause” Defined.         For purposes of this Agreement, “cause”for Employee’s termination will exist at any time after the happening of one ormore of the following events:

                           (i)          a failure or refusal to comply in anymaterial respect with the reasonable policies, standards or regulations of theCompany;

                           (ii)         a good faith determination by theCompany  that Employee’s performance is unsatisfactoryafter reasonable notice of the ways in which performance is unsatisfactory anda reasonable opportunity to correct any such deficiencies;

                           (iii)        a failure or refusal in any materialrespect to perform his duties determined by the Company in accordance with thisAgreement or the customary duties of Employee’s employment (except for anyfailure due to ill health or disability);

                           iv)         unprofessional, unethical or fraudulentconduct or conduct that materially discredits the Company or is materiallydetrimental to the reputation, character or standing of the Company;

                           (v)        dishonest conduct or a deliberateattempt to do an injury to the Company;

                           (vi)       Employee’s material breach of a term ofthis Agreement or the Invention Agreement, including, without limitation,Employee’s unauthorized disclosure or theft of the Company’s proprietaryinformation;

                           (vii)      an unlawful or criminal act which wouldreflect badly on the Company in the Company’s reasonable judgment; or                           (viii)     Employee’s death.
8.          **Effect of Termination**

             (a)         Terminationfor Cause or Voluntary Termination.       Inthe event of any termination of this Agreement pursuant to Sections 7(a)(i) or7(a)(iii), the Company shall pay Employee the compensation and benefitsotherwise payable to Employee under Section 5 through the date oftermination.  Employee’s rights underthe Company’s benefit plans of general application shall be determined underthe provisions of those plans

             (b)        Termination Without Cause.   In the event of any termination of thisAgreement pursuant to Section 7(a)(ii) during the period ending one year afterthe Effective Date:

                           (i)          the Company shall pay Employee thecompensation and benefits otherwise payable to Employee under Section 5 throughthe date of termination (including a pro rata portion of any bonus compensationthat may become payable for the calendar quarter that includes the date oftermination, which bonus compensation shall be paid following the end of suchcalendar quarter);

                           ii)          for a period ending on the later of oneyear after the Effective Date or six months following the date of termination,the Company shall continue to pay Employee his base salary under Section 5(a)above at Employee’s then current salary, less applicable withholding taxes,payable on the Company’s normal payroll dates during that period;

                           (iii)        Employee’s rights under the Company’sbenefit plans of general application shall be determined under the provisionsof those plans.

9.          **Miscellaneous**

             (a)         Arbitration.      Employee and the Company shall submit tomandatory binding arbitration in Seattle, Washington any controversy or claimarising out of, or relating to, this Agreement or any breach hereof, provided,however, that Employee and the Company retain their right to and shall not beprohibited, limited or in any other way restricted from, seeking or obtainingequitable relief from a court having jurisdiction over the parties.  Such arbitration shall be conducted inaccordance with the employment dispute arbitration rules of the AmericanArbitration Association in effect at that time, and judgment upon thedetermination or award rendered by the arbitrator may be entered in any courthaving jurisdiction thereof.

             (b)        Severability.     If any provision of this Agreement shall befound by any arbitrator or court of competent jurisdiction to be invalid orunenforceable, then the parties hereby waive such provision to the extent thatit is found to be invalid or unenforceable and to the extent that to do sowould not deprive one of the parties of the substantial benefit of itsbargain.  Such provision shall, to theextent allowable by law and the preceding sentence, be modified by sucharbitrator or court so that it becomes enforceable and, as modified, shall beenforced as any other provision hereof, all the other provisions continuing infull force and effect.

 

             (c)         Remedies.         The Company and Employee acknowledge that the service to beprovided by Employee is of special, unique, unusual, extraordinary andintellectual character, which gives it peculiar value the loss of which cannotbe reasonably or adequately compensated in damages in an action at law.  Accordingly, Employee hereby consents andagrees that for any breach or violation by Employee of any of the provisions ofthis Agreement including, without limitation, Section 3, a restraining orderan/or injunction may be issued against Employee, in addition to any otherrights and remedies the Company may have, at law or equity, including withoutlimitation the recovery of money damages.

             (d)        No Waiver.      The failure by either party at any time to require performanceor compliance by the other of any of its obligations or agreements shall in noway affect the right to require such performance or compliance at any timethereafter.  The waiver by either partyof a breach of any provision hereof shall not be taken or held to be a waiverof any preceding or succeeding beach of such provision or as a waiver of theprovision itself.  No waiver of any kindshall be effective or binding, unless it is in writing and is signed by theparty against whom such waiver is sought to be enforced.

             (e)         Assignment.    This Agreement and all rights hereunder arepersonal to Employee and may not be transferred or assigned by Employee at anytime.  The Company may assign itsrights, together with its obligations hereunder, to any parent, subsidiary,affiliate or successor, or in connection with the sale, transfer, or otherdisposition of all or substantially all of its business and assets,provided, however, that any such assignee assumes the Company’s obligationshereunder.

             (f)         Withholding.   All sums payable to Employee hereunder shallbe reduced by all federal, state, local and other withholding and similar taxesand payments required by applicable law.

             (g)        Entire Agreement.        This Agreement and the InventionAgreement constitute the entire and only agreement between the parties relatingto employment of Employee with the Company, and this Agreement and theInvention Agreement supersede and cancel any and all previous contracts,arrangements or understandings with respect thereto.

             (h)        Amendment.    This Agreement may be amended, modified, superseded, canceled,renewed or extended only by an agreement in writing executed by both partieshereto.

             (i)          Notices.            All notices and other communications required orpermitted under this Agreement shall be in writing and hand delivered, sent bytelecopier, sent by certified first class mail, postage prepaid, or sent bynationally recognized express courier service. Such notices and other communications shall be effective upon receipt ifhand delivered or sent by telecopier, five days after mailing if sent by U.S.mail, and one day after dispatch if sent by express courier, to the followingaddresses, or such other addresses as any party shall notify the other parties:
 If  to the Company:110-110th  Avenue N.E., Suite 700  Bellevue,  WA 98004-5840 Telecopier:206-637-1540 Attention:Chairman  of the Board of Directors    If  to Employee:Sudheer  Koneru  (at  the address on the records of the Company) 
             (j)          Binding Nature.            This Agreement shall be bindingupon, and inure to the benefit of, the successors and personal representativesof the respective parties hereto.

             (k)         Governing Law.            This Agreement and the rights andobligations of the parties hereto shall be construed in accordance with thelaws of the State of Washington, without giving effect to the principles ofconflict of laws; provided, however, that if Employee is relocated to anotherjurisdiction then the laws of such jurisdiction shall apply, and in the eventof any claim made following termination, the laws of the jurisdiction whereEmployee was located on the date of termination shall apply.

             INWITNESS WHEREOF the Company and Employee have executed this Agreement as of thedate first above written.
“COMPANY” “EMPLOYEE”CLICK2LEARN.COM,  INC.  
 

 
By:          Sudheer  KoneruName      Title: